In Re the Estate of Long , 2014 S.D. LEXIS 45 ( 2014 )

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2014 S.D. 26
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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IN THE MATTER OF THE
ESTATE OF EARL W. LONG,
DECEASED.
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APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
FALL RIVER COUNTY, SOUTH DAKOTA
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THE HONORABLE WALLY EKLUND
Judge
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PATRICK M. GINSBACH
Farrell, Farrell & Ginsbach, PC
Hot Springs, South Dakota Attorneys for appellant Brenda
F. Long-Chafin.
AARON T. GALLOWAY
Lynn, Jackson, Shultz & Lebrun, PC
Rapid City, South Dakota Attorneys for appellee
Vicky J. Smith.
QUENTIN L. RIGGINS
Gunderson Palmer Nelson &
Ashmore, LLP
Rapid City, South Dakota Attorneys for appellee
Lynda Davis.
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CONSIDERED ON BRIEFS
ON FEBRUARY 18, 2014
OPINION FILED 04/30/14
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GILBERTSON, Chief Justice
[¶1.] Brenda Chafin challenges the validity of her father’s estate plan. After
a formal probate proceeding, the circuit court determined that the estate plan was
valid. We affirm.
Facts and Procedural History
[¶2.] Earl Long passed away at the age of 78 on February 26, 2010. He was
survived by four daughters: Vicky, Lynda, Diann, and Brenda. Earl’s daughters are
the only heirs of the estate.
[¶3.] Prior to his death, Earl and his late wife, Shirley, had operated two
seasonal resorts. One of the resorts, Long’s Seasonal Resort, was active at the time
of Earl’s death. Although each daughter worked at the Seasonal Resort, Vicky and
her husband, Dean, worked there most consistently and for the longest period of
time.
[¶4.] Earl began the process of planning his estate in 2005. His first step in
the planning process was a meeting with his attorney, Mark Walters. Three of
Earl’s daughters also attended the meeting; however, Vicky and Dean did not
attend. Among the topics discussed at the meeting were strategies to reduce
conflict upon Earl’s death, trust protection for Brenda, gifting of land, and a
creation of a limited liability company (LLC) to hold property separate from Earl’s
trust.
[¶5.] On August 30, 2008, Earl properly executed a “pourover” will. The will
stated that all property would be distributed to his trust “as amended.” On the
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same day, Earl executed The Earl W. Long Trust, which was a revocable trust with
Earl appointed as trustee.
[¶6.] Following the execution of his will and trust, Earl began gifting some
of his assets. On October 3, 2009, Earl executed a memorandum of gifts, which was
notarized by Walters and witnessed by Vicky and Dean. Earl executed a second
memorandum of gifts on October 5, which was witnessed by Dean and Lynda. The
contents of both memorandums were relatively the same. The memorandums
documented gifts to Earl’s four daughters of approximately $250,000 each.
[¶7.] In accordance with the memorandums of gifts, Earl acquired land from
Vicky so that the land could be given to the other three daughters. In return, Earl
deeded Vicky his half interest in the “home place.” Earl intended for the value of
the home place to be greater than the value of the land deeded by Vicky so that the
difference in value between the two properties was a gift to Vicky. 1 The October 5
memorandum specified that Vicky acquired the home place subject to a life estate,
which reserved the income from the Seasonal Resort in favor of Earl.
[¶8.] Earl next gave property to his other daughters. Diann received a gift
of land free of encumbrances by warranty deed on October 3. Lynda also received a
gift of land free of encumbrances on October 3. In July 2007, Earl had purchased
both a piece of property and a mobile home for Brenda, which became her
permanent residence. In September 2008, Brenda deeded her half interest as a
joint tenant in the property to Earl. In exchange, Earl created a trust for Brenda to
provide for her after his passing. Brenda raised no objection to the trust and she
1. The value of the land was based on an appraisal conducted in 2005.
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continued to live on the property. On October 3, 2009, Earl transferred the property
into Brenda’s trust. In addition, Earl gave Brenda $100,000 to fund her trust and
$20,000 cash outside the trust.
[¶9.] Later in the fall of 2009, Earl began assessing which property, apart
from the property he had already given, would be put into his trust to be distributed
upon his death. To carry out his estate plan Earl developed color-coded “maps” that
outlined how the remaining land would be divided. Land allocated to Brenda’s trust
was colored pink. Land allocated to Diann was green. Lynda’s land was blue; and
Vicky’s land was yellow. Land in trust, to be distributed at death to the LLC, was
orange. Lastly, “striped” land represented the land that had previously been given
to the daughters through the memorandum of gifts. Earl ultimately selected a map,
which was dated December 12, 2009, and initialed “EWL.”
[¶10.] On January 23, 2010, Earl amended Brenda’s trust so that all income
from the trust would no longer be distributed to Brenda on a monthly basis.
Instead, the income would pay for her basic housing expenses and maintenance of
her residence. Brenda’s amended trust gave discretion to the trustee to pay health,
dental, and car insurance.
[¶11.] Earl also amended his trust on January 23. The amendment added
“Section 6.3,” which referenced the map created on December 12, 2009. The
amendment also set forth the color-coded property designation. Additionally, the
amendment stated that the trustee would create an LLC to hold designated land to
be sold. Vicky was selected to manage the LLC “for the four children equally after
[Earl was] gone.”
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[¶12.] Earl died on February 26, 2010. Following his death, Vicky filed the
Articles of Organization for Long Land Company, LLC on April 13, 2010. After
Earl’s passing, Brenda executed a document accepting the plan of distribution of the
color-coded map. Brenda also executed a document consenting to the use of certain
equipment, machinery, and other personal property for maintaining the lots held by
the LLC. The four daughters agreed to the sale of two parcels of property by the
LLC and each daughter received an equal share of the sale proceeds.
[¶13.] In accordance with Earl’s will, Vicky and Dean were named co-
personal representatives for the estate. Prior to the closing of the estate under
informal probate, Brenda filed a petition for formal probate of the will. Brenda and
Diann had retained counsel to interpret the language of Earl’s trust because they
had concerns about the income from the Seasonal Resort and the restrictive
language of Brenda’s trust. Brenda also requested that Diann be named as the
personal representative of the estate. In hopes of limiting conflict between the
sisters, Vicky did not object to Diann serving as personal representative.
[¶14.] The formal probate proceeding was conducted on December 5, 6, and
17, 2012. The circuit court concluded that Earl’s estate plan was valid. The court
determined: (1) Earl was competent; (2) neither Vicky nor Dean exercised undue
influence over Earl; (3) the trust documents did not call for an equalization of the
remaining property; (4) Brenda’s trust was properly amended; and (5) Brenda was
not entitled to attorney’s fees.
[¶15.] Brenda appeals the decision of the circuit court. She raises the
following issues on appeal:
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1. Whether Earl lacked the requisite testamentary capacity to
carry out his estate plan.
2. Whether Earl’s estate plan was the result of undue influence.
3. Whether Earl’s Trust required the distributions to be
equalized.
4. Whether the doctrine of promissory estoppel barred the
modification of Brenda’s trust.
5. Whether Brenda and her attorney are entitled to attorney fees.
Analysis and Decision
[¶16.] 1. Whether Earl lacked the requisite testamentary capacity to carry
out his estate plan.
[¶17.] Brenda argues that the circuit court erred when it determined that
Earl had the requisite testamentary capacity to carry out the 2009 gifts and the
2010 amendments to his trust.
[¶18.] Whether Earl possessed the requisite testamentary capacity is a mixed
question of law and fact, which requires a compound inquiry. Stockwell v.
Stockwell, 2010 S.D. 79, ¶ 15, 790 N.W.2d 52, 58. Therefore, we are required to not
only review the circuit court’s findings of fact, but also the court’s application of
settled law to those facts. Id. For purposes of making a testamentary document,
one has a sound mind “if, without prompting, he is able to comprehend the nature
and extent of his property, the persons who are the natural objects of his bounty
and the disposition that he desires to make of such property.” In re Estate of
Dokken, 2000 S.D. 9, ¶ 13, 604 N.W.2d 487, 491 (quoting In re Estate of Long, 1998
S.D. 15, ¶ 21, 575 N.W.2d 254, 257). Additionally, “[t]estamentary capacity is not
determined by any single moment in time, but must be considered as to the
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condition of the testator’s mind a reasonable length of time before and after the
[testamentary document] is executed.” Stockwell, 2010 S.D. 79, ¶ 27, 790 N.W.2d at
62 (citation omitted). Because the 2009 gifts and the 2010 amendments to Earl’s
trust were executed with a mind toward disposition of the property after death, we
treat them as testamentary in nature. See In re Estate of Pringle, 2008 S.D. 38, ¶
24, 751 N.W.2d 277, 285.
[¶19.] To illustrate that Earl lacked testamentary capacity, Brenda relies on
Dr. Heather Cwach’s medical evaluation. Dr. Cwach examined Earl on October 6,
2009, the day after Earl completed a memorandum of gifts. Dr. Cwach
administered a series of tests, including a mini mental-state exam, and found that
“[Earl] was alert.” She also observed that Earl’s exam score was “common,” but
showed that he was “mildly impaired.” Dr. Cwach did acknowledge, however, that
educational background could play a role in the score and that Earl had a 9th grade
education. Although Dr. Cwach noted “Dementia, probably Alzheimer’s disease” in
her assessment, she testified that this was not an official diagnosis.
[¶20.] Beyond Dr. Cwach’s evaluation, however, Brenda’s evidence reveals
little about Earl’s capacity. In fact, but for that brief moment in time, the evidence
proved that Earl had the requisite capacity to execute his estate plan. After his
visit with Dr. Cwach, Earl was seen by Dr. John Knecht and was admitted to the
Fall River Hospital Swing Bed unit for physical therapy, occupational therapy, and
respiratory therapy. No mention was made of dementia or Alzheimer’s as a chief
complaint. Following his urological surgery, Earl was monitored by Dr. Knecht.
Again, there was no mention in Dr. Knecht’s notes that Earl suffered from
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confusion, dementia, or Alzheimer’s. Dr. Knecht saw Earl on a number of other
occasions after Earl was discharged from the hospital. Notably, Dr. Knecht
conducted a mental health examination of Earl, which was recommended by
Walters. 2 After examining Earl on February 9, 2010, Dr. Knecht concluded that
Earl had performed so well that it was unnecessary to conduct additional testing.
He also noted that Earl was “absolutely normal as far as his mental health status
exam today.” Dr. Knecht testified that he never observed any indications that Earl
suffered from an inability to make decisions for himself.
[¶21.] The circuit court also heard testimony from a number of other
individuals who recalled interacting with Earl, both personally and professionally,
during the relevant times in question. None of these individuals believed that Earl
lacked the mental capacity to make decisions. Some even described him as “sharp
as a tack.” By contrast, in addition to the testimony of Dr. Cwach, Brenda only
offered testimony from one of her coworkers who did not know Earl personally. The
circuit court ultimately determined that the evidence overwhelmingly supported
that Earl was competent to execute his estate plan. In determining testamentary
capacity we have stressed the importance of giving “due regard to the trial court’s
opportunity to observe the witnesses and the evidence.” Dokken, 2000 S.D. 9, ¶ 10,
604 N.W.2d at 491 (quoting In re Estate of Unke, 1998 S.D. 94, ¶ 11, 583 N.W.2d
145, 148). In light of the evidence presented, the circuit court did not err in
determining that Earl had the requisite capacity to carry out his estate plan.
2. Walters later testified that it was common for him to recommend that his
clients receive a mental health exam when he can sense a potential estate
contest.
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[¶22.] 2. Whether Earl’s estate plan was the result of undue influence.
[¶23.] Brenda next argues that the 2009 gifts and the 2010 amendments to
Earl’s trust were the result of undue influence. Like testamentary capacity, undue
influence is a mixed question of fact and law. Stockwell, 2010 S.D. 79, ¶ 15, 790
N.W.2d at 58.
[¶24.] The circuit court concluded that because of Vicky’s confidential
relationship with Earl, a presumption of undue influence arose. “A presumption of
undue influence arises when there is a confidential relationship between the
testator and a beneficiary who actively participates in preparation and execution of
the will and unduly profits therefrom.” Id. ¶ 31 (quoting Pringle, 2008 S.D. 38, ¶
39, 751 N.W.2d at 289). “A confidential relationship exists whenever a decedent has
placed trust and confidence in the integrity and fidelity of another.” Id. (quoting In
re Estate of Duebendorfer, 2006 S.D. 79, ¶ 27, 721 N.W.2d 438, 445). In the instant
case, the presumption arose in part because Vicky assisted Earl with writing checks
in his later years, helped with the color-coded maps, and offered advice at several
meetings.
[¶25.] Once a presumption of undue influence arises, “the burden of going
forward with the evidence shifts to the beneficiary to show he took no unfair
advantage of the decedent.” Unke, 1998 S.D. 94, ¶ 13, 583 N.W.2d at 148 (citation
omitted). However, “[t]he ultimate burden remains on the person contesting the
will to prove the elements of undue influence by a preponderance of the evidence.”
Id. (citation omitted).
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[¶26.] To show the existence of undue influence, the following elements must
be established: “(1) [the] decedent’s susceptibility to undue influence; (2) [the]
opportunity to exert such influence and effect the wrongful purpose; (3) a
disposition to do so for an improper purpose; and, (4) a result clearly showing the
effects of undue influence.” Stockwell, 2010 S.D. 79, ¶ 35, 790 N.W.2d at 64
(citation omitted). “For influence to be undue it must be of such a character as to
destroy the free agency of the testator and substitute the will of another for that of
the testator.” Id. (quoting Pringle, 2008 S.D. 38, ¶ 44, 751 N.W.2d at 291).
[¶27.] Brenda argues that the value of the “home place” property Vicky
received demonstrates the effects of undue influence. Brenda alleges that the home
place produces an income of approximately $50,000 a year. Furthermore, Brenda
contends that Vicky received a property distribution that was valued at $700,550
more than Brenda’s property distribution. The circuit court determined that
Brenda failed to establish both Earl’s susceptibility to undue influence and a result
showing the effects of undue influence.
[¶28.] Brenda’s evidence did not establish that Vicky exercised undue
influence because Brenda did not prove that Earl was susceptible to undue
influence. The circuit court highlighted that Earl was an independent person, a
rancher, and a businessman. Earl also had the testamentary capacity to carry out
his estate plan. Brenda offered little evidence to dispute these facts. Therefore,
because Earl was not susceptible to undue influence, the circuit court was correct in
determining that the 2009 gifts and the 2010 amendments to the trust were not the
product of undue influence
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[¶29.] Additionally, Brenda did not prove a result clearly showing the effects
of undue influence. Brenda fails to account for whether Earl, in choosing how to
divide his assets, may have considered the role each daughter played in the
acquisition and maintenance of his land and seasonal resorts. The circuit court
noted that Vicky worked with Earl more often than the other sisters. She and her
husband assisted Earl with the Seasonal Resort and with ranching responsibilities.
While a presumption of undue influence did arise, Vicky has rebutted that
presumption. The ultimate burden remains with Brenda, who has failed to
establish by a preponderance of the evidence that Vicky exercised undue influence.
[¶30.] 3. Whether Earl’s trust required the distributions to be equalized.
[¶31.] Brenda next argues that the circuit court erred by not requiring the
trustee to equalize all the remaining property under a review of Earl’s entire estate
plan. “Trust interpretation is a question of law reviewed de novo.” In re Sunray
Holdings Trust, 2013 S.D. 89, ¶ 11, 841 N.W.2d 271, 274 (citation omitted). When
interpreting a trust instrument, we must “ensure that the intentions and wishes of
the [settlor] are honored.” Id. ¶ 14 (quoting In re Florence Y. Wallbaum Revocable
Living Trust, 2012 S.D. 18, ¶ 20, 813 N.W.2d 111, 117). To carry out the settlor’s
intentions, “we first ‘look to the language of the trust instrument.’” Id. (quoting In
re Schwan 1992 Great, Great Grandchildren’s Trust, 2006 S.D. 9, ¶ 12, 709 N.W.2d
849, 852). “If the language of the trust instrument makes the intention of the
[settlor] clear, it is our duty to declare and enforce it.” Id. (quoting In re Florence Y.
Wallbaum Revocable Living Trust, 2012 S.D. 18, ¶ 20, 813 N.W.2d at 117).
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[¶32.] Brenda claims that the circuit court erred by concluding that Earl did
not intend for Section 7.3.1 to be active at his death. 3 She alleges that Earl’s trust
required all four daughters to receive equal shares of Earl’s estate plan; however,
Vicky received property that was more valuable than the property the other three
daughters received. Therefore, Brenda requests that the remaining assets in Earl’s
estate be distributed in a matter that accounts for the property that Vicky received.
[¶33.] The circuit court concluded that a plain reading of Earl’s trust, the
2010 amendments to the trust, and the 2009 memorandums of gifts all illustrated
that Earl did not intend for the contingent language of Section 7.3.1 to be active at
his death. Additionally, the circuit court noted that Article 7.1 of the trust required
that “any property remaining in the Trust (Trust Residue) shall be divided into four
shares, one for each of the Grantor’s children.” But the court observed that the
trust did not contain language suggesting that these shares must be divided equally
or redistributed to account for the value of the land Vicky received.
[¶34.] A plain reading of Earl’s trust supports the circuit court’s conclusion.
Attorney Walters testified that Section 7.3.1 was intended to be a “catch all” or
contingency provision. However, it was unnecessary for this contingency language
to be active at Earl’s death because Earl had already disposed of his property during
3. Section 7.3.1 of Earl’s trust provided in part:
The trustee is hereby directed to make a summary of all
distributions of the Grantor’s property . . . . The trustee shall
determine each beneficiary’s total share of the estate and shall
make adjustments to each beneficiary’s trust distribution, if
necessary, to achieve the percentage of total distribution to each
beneficiary as provided for in Article Seven (7) of this trust
agreement.
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his life through the memorandum of gifts and subsequent amendment to his trust,
which divided his property into four shares.
[¶35.] Brenda maintains, however, that Section 7.3.1 should be used to
distribute the estate’s remaining property, such as Earl’s life insurance plan, to
account for the fact that Vicky received more valuable land than the other sisters.
But contrary to Brenda’s position, Article 7 does not contain any percentages of
total distribution for the four daughters. It is true that Section 7.3.2 requires that
any distribution “calculation include the value of any property passing as a specific
bequest as stated in Section 6.2.” And Section 6.2 references any gifts made,
specifically stating that any gifts to be contemplated are set forth in “Schedule B.”
But there is no Schedule B. Additionally, none of the memorandums of gifts
reference a Schedule B. Therefore, it would be inappropriate for this Court to give
meaning to a nonexistent provision.
[¶36.] It would also be inconsistent with a plain reading of the trust
instrument to assume that Earl intended to equalize land he had already
distributed. This is especially true when Article 7.1 of the trust instrument does
not require an equalization process to account for the value of the land Vicky
received. Furthermore, prior to Earl’s death, four shares of property were divided
among the four daughters referenced in the land map. The remaining property was
placed in the LLC and held for the four daughters “equally,” as provided in the trust
instrument. Had Earl intended the result Brenda now requests for the remaining
property, he would have used language requesting that result. But no such
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language exists. Therefore, a plain reading of the trust instrument supports the
circuit court’s conclusion. We affirm the circuit court’s decision. 4
[¶37.] KONENKAMP, ZINTER, SEVERSON, and WILBUR, Justices, concur.
4. Brenda asserts two additional claims on appeal: promissory estoppel and a
request for attorney’s fees. We conclude that the circuit court did not err in
rejecting Brenda’s promissory estoppel claim and request for attorney’s fees.
Accordingly, we affirm on these issues.
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